Fannie Mae Says Housing to Bottom Out at End of 2008

Fannie Mae Chief Executive Daniel Mudd said in an interview today in Washington that the housing slump will continue longer than earlier anticipated, estimating a downward trend beyond 2008.

Mudd said that home prices would fall 2 to 4 percent this year, and “more next year.”

Fannie Mae expects increased credit losses as a result, thanks in part to record foreclosure rates.

According to the Commerce Department, home purchases slowed by 8.3% to an annual pace of 795,000, while the median price dropped 7.5 percent from August 2006, the biggest decline since 1970.

Earlier this month, the National Association of Realtors felt home prices would stop their descent in the first quarter of 2008, though new estimates are much more bearish.

KB Homes Chief Jeffrey Mezger mirrored negative sentiment, explaining that the oversupply of new and resale homes is putting more downward pressure on new home values and exacerbating any chance of a recovery.

Meanwhile, Fannie Mae is looking for a 10 percent increase to its current loan portfolio, citing the need for expansion to help at-risk homeowners who have little or no option to refinance.

The current constraints won’t be lifted until Fannie Mae gets in the habit of reporting timely financial reports.

The company expects to release its 2007 results in February, at which point the current caps may be eased.

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